The yuan closed slightly lower against the dollar on Monday due to late dollar buying after the Chinese currency hit a fresh post-revaluation high for the fourth straight trading day in intraday trading.
The yuan retreated to close at 7.8667 versus Friday's 7.8645 as there were some big purchases of the dollar in the last few minutes. In early trade on Monday, the yuan hit an intraday high of 7.8623, the highest level since Beijing revalued it by 2.1 percent and freed it from a dollar peg in July 2005. Its previous trading high was 7.8633, reached on Friday.
On Friday, Chinese central bank governor Zhou Xiaochuan reiterated that China would diversify its $1 trillion foreign exchange reserves, the world's largest. The dollar has remained soft since then, even though many analysts doubt Zhou's comments signalled any policy change.
"Zhou's words rattled the markets even though he did not give a timetable. We can still see the impact today," said a dealer with a major European bank. The yuan has appreciated a further 3.1 percent against the dollar since July 2005. Many traders expect it to hit 7.80 or 7.85 to the dollar by the end of this year.
One-year offshore NDFs quoted the yuan at 7.5590/7.5640 to the dollar, forecasting a yuan rise of between 3.97 and 4.04 percent from the record mid-point of 7.8644 set by the People's Bank of China on Monday morning.